Wyoming power plant stalls 17 years, faces skepticism

WRIGHT, Wyo. (AP) -- In Wyoming, folks call it the "No Elk" plant, an $800 million project that -- once finished -- was meant to supply coal-fired power to 100,000 homes and support dozens of full-time jobs on the rolling prairie of northeast Wyoming.

Megawatts from the Two Elk Energy Park originally were supposed to begin flowing back when Bill Clinton was president. Instead, a series of hang-ups, including the global economic meltdown and difficulty finding an investor willing to share the cost, have kept Two Elk at a virtual standstill. All that's been built on the rolling northeast Wyoming prairie, a stone's throw from some of the world's biggest coal mines, is a metal storage building and part of the plant's foundation.

The power plant has received substantial local, state and federal government support: Almost half a billion dollars in tax-exempt municipal bonds, none of it spent yet, and more recently, $10 million in U.S. Department of Energy grants.

Now, Two Elk is up for a state permit extension -- its seventh in 16 years -- and even some former proponents are growing skeptical.

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"It's kind of a running joke," said Campbell County Commission Chairman Dan Coolidge. "On its face, it seems like a great idea. But it just never materialized."

On one hand, Two Elk shows just how difficult arranging financing and securing permits to build a power plant -- especially one involving coal -- can be these days.

On the other, the project shows just how accommodating Wyoming -- which ranks second only to Texas in producing the nation's raw energy -- can be with a power plant idea.

"The reason this thing seems so attractive is that we've had the idea that, you know, wouldn't it be great if we could maximize the value of these resources here in the state, rather than shipping them off to power plants in other places where they generate jobs in other communities?" said Dan Neal with the Equality State Policy Center, a state government watchdog group.

But Wyoming needs to wise up and not waste time and resources with bogged-down projects, Neal said.

"At some point, we've got to be able to read the market's tea leaves just like everybody else does. And if these guys can't get off the ground, then the state's got to move on," he said.

Two Elk would be one of the more unusual large U.S. power plants. The 300-megawatt plant would burn a combination of low-grade coal from the nation's largest coal mines and timber from vast expanses of Rocky Mountain forests killed by a massive beetle infestation.

Two Elk first was proposed in 1996 and originally was supposed to begin generating electricity by the end of 1999.

At first, the plant's sole fuel source was to be low-grade coal from St. Louis-based Arch Coal Inc.'s vast Black Thunder Mine, the biggest of a dozen big Powder River Basin mines that supply about 40 percent of the nation's coal.

Using "waste coal" that otherwise just gets reburied at the mine would save money for the company behind the Two Elk project -- Greenwood Village, Colo.-based North American Power Group, which also has four small coal- and wood-fired power plants in California.

It also would save on transportation compared with what Midwestern utilities spend to ship Powder River Basin coal hundreds of miles by train.

State and local officials liked the idea and did their best to help.

Over a decade, two Wyoming governors authorized Campbell County to issue a total of $445 million in tax-exempt industrial development revenue bonds for the project. The form of municipal bonds helps private-sector projects secure bank financing.

Work on Two Elk progressed slowly, meanwhile, and at a cost to taxpayers.

From 2005 to 2006, northeast Wyoming towns and counties got $10 million in state industrial impact grants they spent to bolster infrastructure and beef up local government services ahead of an influx of 700 construction workers and their families.

The invasion didn't happen then and hasn't to date.

By 2007, the project cost had swelled from $417 million in 2001 to $1.3 billion in 2007. More than ever, the project needed a partner to make up the difference.

"Any time you're talking about trying to invest $700 or $800 million, it's not easy," said Brad Enzi, vice president and Two Elk project leader for North American Power Group Ltd. "It's subject to a lot of things. It's subject to the power market. It's subject to the overall economic condition of our country."

Enzi said he's been talking with a couple prospects to share in the current estimated cost of $800 million, a slightly lower cost than six years ago but still nearly double the initial estimates. A design change a couple years ago from burning only coal to also burning beetle-killed timber -- earning Two Elk precertification from California as a renewable energy source for that state -- has not yielded any takers, however.

"It feels like it's close, sometimes, and then you might be further apart than you thought," he said. "And then other times you're closer than you thought."

As for the bond funding, it hasn't been spent. North American Power Group bought back the bonds in 2008, and they've been on the shelf ever since.

"Technically, there's no money out there. There's just paper," said Campbell County's bond attorney for Two Elk, Mike Reppe, with the firm Kutak Rock.

Two Elk also got government help in 2009 and 2010 from two Energy Department economic stimulus grants totaling $10 million. Researchers at Montana State and Stanford universities used part of the funding to analyze existing geological data to see if the Two Elk site could store the greenhouse gas carbon dioxide.

Under one of the grants, North American Power Group also proposed to drill a deep well to collect more data. How much of that grant got spent isn't clear, but the well didn't get drilled.

Enzi said he didn't know what happened and referred questions about the stimulus funding to Michael Ruffatto, president of North American Power Group, who did not return phone messages.

Representatives from the Department of Energy in Washington, D.C., and the department's National Energy Technology Lab in Morgantown, W.Va., which oversaw the project, declined to comment. They referred all questions to an assistant U.S. attorney in Pittsburgh who declined to comment.

On Monday, the Wyoming Industrial Siting Council, a state citizen panel, will consider a seventh permit extension in 16 years for Two Elk. If approved, completion is targeted in 2016, or 19 years after Two Elk's first industrial siting permit.

The panel considers the impacts large industrial projects would have on surrounding communities. If it denies another extension, Two Elk really could be No Elk. Nothing in Wyoming that big can be built without an industrial siting permit.

A lot can change after so much time, and it's time for a full review, said Sandy Shuptrine, the Industrial Siting Council member who requested the upcoming permit extension meeting.

Fifteen miles down the road from Two Elk, the coal town of Wright, population 1,800, has been booming thanks to gas, oil and uranium development. The population is up by a third since 2000, making it one of Wyoming's fastest-growing towns. A $10 million recreation center, funded largely by taxes on the minerals industry, is on track for completion this year.

Told that a permit extension for Two Elk is coming up, several townspeople expressed surprise the project was even alive still. They hadn't heard about it in years, they said.

"There might be two elk out there somewhere," joked Tamera Van Vleet as she socialized at Hank's Roadside Bar and Grill on the outskirts of town.

"I think most of us are, 'Yeah, we'll believe it when we see it.' Our rec center is going up faster than their cement pad."